A great relief for high tax-payers

Expat pension savers with access to UK pensions can still reclaim up to four
years’ worth of higher-rate tax relief they are due on their contributions,
even though the self-assessment deadline has now passed

Those expats who are paying tax in the UK at the rate of 50 per cent and made the maximum allowed contributions available during the time could be missing out on as much as £15,000 worth of relief, according toAlliance Trust Savings. To maximise your pension planning it is important that you claim that money back.

The Revenueis cracking down on tax avoidance and there is Coalition talk of removing higher-rate tax relief on pensions.

Changes to the way tax relief could be reclaimed and how much you could contribute to a UK pension were made in April 2009, and it meant some high earners would not have been clear on whether they could reclaim tax or not under the Government’s Anti-Forestalling regulations, said Steve Latto, head of pensions at Alliance Trust Savings.

He added: “With numerous changes to the rules that have governed how much individuals can contribute to their pension in recent years, it is possible that many higher rate taxpayers have lost out on additional rate tax relief. The good news is that despite missing the self-assessment deadline, individuals can claim back up to four years’ worth of tax relief on their pension contributions. As well as ensuring that they are claiming any tax relief that is due, they should also check their pension plan to ensure they are getting value for money.”

Pension tax relief in the UK is by the scheme administrator at the rate of 20 per cent, but if you are a 40 per cent or even 50 per cent taxpayer, you must reclaim your additional relief through self-assessment. Even if you have no additional tax liabilities, you would still need to file a return to get this money back. You will not necessarily have to put this into your pension. These payments are made by the Revenue into your account or by cheque, so it is your decision.

Of course, many expats will be saving for their pension in offshore funds while they are out of the UK, and in some cases where there is no tax liability on their income, they are effectively getting tax relief on any contributions they are making. One important consideration is where you expect to retire. For example, if you are planning to move back to the UK, you should take advice on the best way to turn your savings into a pension income, and whether it is worth repatriating these funds to the UK for pension purposes.

Depending on how much you have salted away while living abroad, if you return to the UK to work, you may also want to consider using some of this money to put into a UK-based pension and benefit from the tax uplift you would have available. But you should not repatriate your money before getting good advice about the most tax-efficient way of doing this.

The Revenue is getting tough on tax avoidance, and announced on Feb 23 that it is creating 30 new task forces to tackle tax evasion and fraud in the UK. However, for expats with assets offshore, the Liechtenstein Disclosure Facility offers a chance to “regularise” their UK tax affairs until March 31 2015.